Missouri governor wins battle to prevent tax cuts

JEFFERSON CITY, Missouri (Reuters) - Missouri’s Democratic governor on Wednesday won a high-profile battle with the state’s Republican-controlled legislature over tax cuts that he vetoed out of concern they would gut funding for education and other services.

Supporters of the tax cuts, including the Missouri Chamber of Commerce, had said they were necessary to help Missouri compete with other states in drawing investment - notably neighboring Kansas, which in 2012 passed major tax cuts.

In June, Governor Jay Nixon vetoed the legislation containing the cuts, and Republicans sought to override the veto. But the bill’s proponents in the state House of Representatives on Wednesday fell 15 votes short of the 109 needed to override. The bill had passed with 103 votes in the 163-member chamber in May.

Nixon barnstormed the state, saying the cuts would lower state revenue so much that funding for some social programs and education spending would be unacceptably reduced. Nixon, in his second and final term, made 29 appearances to speak for his veto.

After the vote, Nixon released a statement praising supporters for preventing a “reckless experiment.”

“Today’s vote represents a defining moment for our state and a victory for all Missourians,” he said.

His message gained national attention after he won support from school boards across the state. Nixon’s victory could encourage Democrats in other states fighting tax cuts they fear will harm the social safety net.

“We are trying to help the people of Missouri grow,” said bill sponsor Representative T.J. Berry, a Republican, in opening floor debate. “If we do not grow, we will be down here fighting over smaller and smaller pieces of the pie trying to provide services we want.”

The bill called for a 50 percent reduction in the corporate tax rate over 10 years and a similar cut, over five years, in taxes on income declared by a business owner on a personal return. The highest tax rate for an individual taxpayer would drop to 5.5 percent from 6 percent over the next decade.

Several dozen supporters of the bill, wearing T-shirts saying “Grow Missouri,” were among the people who packed the gallery as the House voted on Wednesday.

“Our jobs are bleeding to other states,” said Representative Denny Hoskins, a Republican.

Backers of the veto also were out in force, cheering lawmaker comments they agreed with.

“There are no promises of increased jobs, salaries or the expansion of corporations,” said Democratic Representative Jill Schupp, an opponent of the tax cuts. “We are lining the pockets of top corporate brass for nothing in return.”

Nixon argued that cutting educational funding would harm schools and mental health services, while supporters of the tax cut said more industry and jobs in Missouri would lead to higher tax collections in the long run.

More than 80 school boards in Missouri passed resolutions urging lawmakers to back Nixon. Coalitions formed on both sides of the issue to run statewide advertising.

Some supporters of the tax cuts pledged to try for another bill when the lawmakers convene in January.

“We see this as the first step in a long process to put Missouri on the path to prosperity,” said Bev Randles, chairman of the Missouri Club for Growth, part of a coalition backing the bill.

“I expect there were a number of legislators who bought into the governor’s scare tactics, were buffaloed by that and unfortunately didn’t vote the way they campaigned and said they would,” Randles said.

Missouri is one of a number of states that have considered tax cuts this year, and seven states cut taxes by at least 1 percent, according to the National Conference of State Legislatures. In all, states cut $1.2 billion in taxes in 2013, equivalent to 0.02 percent of all collections, it said.